RETIREMENT IS WHEN everything changes. Seniors may end up with new schedules, new hobbies and even new homes. In the midst of all these exciting changes, don't overlook the mundane: your insurance coverage.
With a new season of life at hand, old policies may no longer meet your needs. However, seniors should be cautious about canceling their policies.
You need to consider your future insurability as well as your individual circumstances and life goals.
"There is no one answer that fits all," says Onofrio Cirianni, a consultant with EisnerAmper Wealth Management and Corporate Benefits, LLC and who is affiliated with Guardian Life and Park Avenue Securities.
These guidelines can help determine which policies are essential and which could be a waste of money.
Here's how to decide which policies you need and what you can skip after age 65.
Do you need life insurance after you retire?
Two must-have policies for seniors.
Five options that may be smart.
One type of insurance to live without.
Do You Need Life Insurance After You Retire?
Although the main purpose of life insurance is to replace lost income, retirees may want to keep their coverage.
"It's an important tool, especially when you start looking at wealth transfer to the next generation," says Todd Soltow, co-founder and retirement planning specialist with Frontier Wealth Management in Spring, Texas.
Most nonspousal beneficiaries who inherit an individual retirement account will need to cash out that account within 10 years, which could result in a sizable tax bill. Soltow says benefits from life insurance could offset that cost.
Jerry Clark, senior insurance solutions consultant with Mariner Wealth Advisors in Overland Park, Kansas, says, "You would be amazed at the number of individuals that use life insurance to facilitate legacy goals."
For instance, a favorite charity may be named the beneficiary of a policy.
Life insurance can also be used to pay off debt, leave an inheritance or provide for a spouse in the event a pension doesn't include survivor benefits.
What's more, policies may offer living benefits that can be used in the event of a terminal illness or the need for long-term care.
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2 Must-Have Policies for Seniors
The following two types of insurance are universally necessary for seniors.
Medical Insurance
"The most obvious insurance retirees need to maintain is health insurance," says Clark.
The increasing cost of health care that comes with advanced age is a major reason to buy medical insurance. And since the implementation of the Affordable Care Act in 2014, the law requires virtually everyone to maintain coverage.
Most seniors age 65 and older are eligible for Medicare. Seniors who are still working may have benefits through their job, and it can make sense to use your workplace plan instead if its benefits are better.
"Medicare doesn't cover 100% of medical costs," Cirianni says.
He advises retirees to consider purchasing a supplemental plan, such as Medigap and Part D coverage, to help pay for services not fully covered by Original Medicare. Using a Medicare Advantage Plan, offered by private insurers, is another way to fill in coverage gaps.
Medicare imposes a late enrollment penalty on those who don't sign up for Medicare Part B and Part D when initially eligible, but that penalty may not apply if someone has group coverage through the workplace. Seniors should confirm whether the penalty will be waived before declining to enroll at age 65.
Homeowners or Renters Insurance
These policies insure against the loss of property and possessions and also provide liability coverage. Seniors who have valuable jewelry, art or other items may need to add a rider to their policy to fully insure these things.
Mortgage lenders require homeowners to maintain coverage, but once the loan is paid off, it can be tempting to save money by canceling the policy.
That could be a costly mistake, according to Ana Robic, chief operating officer for personal risk services at insurer Chubb.
"Your earning years are in your past," she says. "If you have a (loss), the only other place to get money is savings."
Retirees should also be aware of how their coverage needs change in retirement. Those who plan to add a pool or entertain family and friends regularly in their home may want to increase their liability limits.
Meanwhile, moving to a different geographic location may mean new insurance is needed for potential disasters such as earthquakes or flooding.
"There may be hazards you aren't used to, (and) you have to make a conscious decision to purchase coverage for those," Robic explains.
5 Options That May Be Smart
Beyond health insurance and homeowner coverage, there are a number of other insurance products that could be helpful to seniors. Many retirees will find one or more of the following insurance policies are right for them.
Travel Insurance
Retirees who plan to travel extensively may want to purchase a comprehensive travel insurance product, Robic says. Look for a policy that includes features such as emergency medical and medical evacuation services along with trip delay or cancellation insurance.
Car Insurance
Like health insurance, car insurance is legally mandated in almost every state. Any senior who is still driving and owns a vehicle should insure it properly.
Umbrella Insurance
An umbrella policy provides additional liability coverage above and beyond what's included in homeowner and car insurance. You don't need to be affluent to find these policies beneficial either.
"You might be sitting on a not-for-profit board," Robic says. That position or other volunteer activities could put you at risk for a liability claim and warrant added insurance coverage.
Annuities
Seniors are living longer, and so a person's savings might not be enough to cover an extended retirement.
An immediate annuity can help guard against outliving savings by providing a guaranteed source of income. They can be purchased for a lump sum amount and provide monthly payments that are based on a person's age and the purchase price.
"These are policies that insure retirees against running out of money," says Soltow.
Long-Term Care Insurance
Medicare won't pay for ongoing custodial care in a nursing home or assisted living facility, and Medicaid coverage will only kick in once someone has depleted almost all their assets.
However, long-term care insurance may pay for care either in a facility or in a person's home.
"It is expensive," Soltow says. "But if you compare that to a five-, six-, seven-year stay (in a nursing home), all of a sudden, the cost of these policies doesn't look all that expensive."
For those who worry about purchasing insurance they may never need, hybrid life insurance/long-term care policies will pay out a death benefit to beneficiaries if a person doesn't exhaust their coverage limits before passing away.
1 Type of Insurance to Live Without
Just as there are two types of coverage virtually every senior needs, there is also one insurance policy almost every senior can do without.
Disability Insurance
Once seniors are not working at all, the need for disability insurance disappears. Even if they are unable to work due to an accident or an illness, they will be able to use their retirement benefits, assets or, potentially, long-term care insurance instead of relying on disability coverage.
"Many repurpose the premium dollars spent on disability insurance for other forms of insurance needed in retirement," Clark says.
Even if someone wants to maintain disability coverage in retirement, it might not be possible.
Cirianni says, "To continue these disability policies, you typically need to work 30 hours a week."